Mexico Economic Activity October 2016

Mexico: Economic activity decelerates further in October

December 22, 2016

Mexico - October’s monthly proxy GDP (IGAE) produced by INEGI decelerated from a 1.6% year-on-year increase in September to a 1.2% expansion in October and fell also short of the 1.4% rise the markets had expected. October’s lackluster result continued to reflect a disappointing industrial sector, while growth in agriculture and services moderated their pace of expansion.

In sequential terms, economic activity—adjusted for seasonal variations—increased 0.2% over the previous month in October, which was down from the 0.5% rise in September.

All in all, October’s result suggests that GDP weakness carried over into Q4 and that the overall trend in economic activity is starting to moderate. Annual average growth in economic activity was unchanged at September’s 2.2% in October, which suggests that this is Mexico’s “new normal” growth rate.

In its most recent Inflation Report, the Central Bank (Banxico) trimmed its growth forecasts and now expects the economy to grow between 1.8% and 2.3% (previous estimate: 1.7% and 2.5%). For 2017, the Bank expects GDP to grow between 1.5% and 2.5% (previous estimate: 2.0% and 3.0%). According to the latest survey of analysts for the LatinFocus Consensus Forecast, panelists see the economy increasing 2.1% in 2016, which is unchanged from last month’s forecast. For 2017, the panel expects growth to pick up to 2.0%.

Sentiment among Mexican consumers rose in August, reaching an over one-year high and extending the streak of consecutive improvements in consumer confidence seen since Donald Trump’s inauguration in January 2017, when sentiment had slumped to a record low.

The seasonally-adjusted manufacturing indicator produced by the Mexican Institute of Financial Executives (IMEF) leaped from 51.8 in July to 54.0 in August, marking the second-best reading in nearly three years.